Invesco Asia Trust. Track record of solid long-term performance. Investment strategy: High conviction, fundamental

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1 Invesco Asia Trust Track record of solid long-term performance Investment trusts Invesco Asia Trust (IAT) aims to provide attractive long-term capital growth through investing in a diversified portfolio of Asian and Australasian equities. With few investment constraints, the relatively concentrated portfolio of 5-6 stocks is a reflection of the manager s highest conviction ideas, driven primarily by bottom-up considerations. IAT has a solid longterm track record and its NAV total return has outperformed the benchmark over three, five and 1 years. Asian equities have performed strongly over the past two years, leaving valuations above the historic average. However, they remain at a meaningful discount to global equities, and the manager continues to find attractive long-term investment ideas. 12 months Share price NAV Benchmark* MSCI World FTSE All-Share ending 28/2/14 (6.3) (7.3) (1.1) /2/ /2/16 (7.8) (9.2) (13.2) (.7) (7.3) 28/2/ /2/ Source: Thomson Datastream. Note: All % on a total return basis in GBP. *Benchmark is MSCI AC Asia Pacific ex-japan until 3 April 215 and MSCI AC Asia ex-japan thereafter. Investment strategy: High conviction, fundamental IAT has a fundamental approach in seeking quality companies with strong balance sheets, cash flows and management, which are trading at a significant discount to estimated fair value on a three- to five-year investment horizon. A team of six UKbased Asian equity specialists facilitate IAT s bottom-up process, which involves meeting around 7 companies a year, and conducting in-depth analysis to help build a diversified portfolio of around 5-6 highest conviction stocks. Top-down analysis helps to guide country and sector weights. Market outlook: Conditions still benign The MSCI Asia AC ex-japan index has risen 19.5% in the year to end-february 218, outperforming both the MSCI World and FTSE All-Share indices. Earnings upgrades have been stronger than expected, lifted by accelerating and synchronous global growth. Looking ahead, although stock markets are now more fairly priced than last year, and earnings surprises could be harder to achieve, the economic backdrop nevertheless remains supportive, while Asian equity valuations, especially relative to global equities, do not appear overstretched. Valuation: Discount in line with three-year average IAT currently trades at an 11.% discount to ex-income NAV, which is in line with its three-year average, with the discount ranging between 6.8% and 14.2% over this period. The board is committed to managing the discount and views a level below 1.% to be desirable under normal market conditions. A policy review in 217 now gives the board discretion to repurchase shares, when it deems conditions to be appropriate, and when a repurchase can enhance NAV. 23 March 218 Price 284.p Market cap AUM 21.4m 232.m NAV* 32.8p Discount to NAV 11.% NAV** 326.7p Discount to NAV 13.1% *Excluding income. **Including income. As at 21 March 218. Yield 1.5% Ordinary shares in issue 7.9m Code Primary exchange AIC sector Benchmark IAT LSE Asia Pacific ex-japan MSCI AC Asia ex-japan Share price/discount performance Share price Three-year performance vs index Feb week high/low 31.5p 251.8p NAV** high/low 347.8p 284.9p **Including income. Gearing Gross*.% Net cash*.5% *As at 28 February 218. Analysts Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 May-15 Aug-15 Nov-15 IAT Equity Feb-16 IAT Equity Helena Coles +44 () Mel Jenner +44 () investmenttrusts@edisongroup.com Edison profile page May-16 Aug-16 Nov-16 May-17 Discount Aug-17 Benchmark Invesco Asia Trust is a research client of Edison Investment Research Limited Nov Discount

2 Exhibit 1: Trust at a glance Investment objective and fund background IAT s objective is to provide long-term capital growth by investing in a diversified portfolio of Asian companies. On 1 May 215 the trust adopted a new benchmark, MSCI AC Asia ex-japan, in place of the former benchmark, MSCI AC Asia Pacific ex-japan. While the new benchmark excludes Australasia, the trust may still invest in these markets. Recent developments 14 December 217: Interim report for six months ending 31 October 217. NAV TR +14.8% versus benchmark TR +15.5%. Share price TR +13.4%. 11 August 217: 15% of shares repurchased for cancellation in tender offer at a 2% discount to NAV. 1 August 217: Neil Rogan appointed as a non-executive director. 28 June 217: Annual report for 12 months ending 3 April 217. NAV TR +4.6% versus benchmark TR +37.5%. Share price TR +42.9%. 28 June 217: Annual dividend of 4.3p declared, +17.8% versus FY16. Forthcoming Capital structure Fund details AGM August 218 Ongoing charges.97% (February 218) Group Invesco Asset Management Ltd Annual results June 218 Net cash 1.% Manager Ian Hargreaves Year end 3 April Annual mgmt fee.75% Address 125 London Wall Dividend paid July/August Performance fee None London EC2Y 5AS Launch date July 1995 Trust life Indefinite Phone +44 () Continuation vote Three-yearly, next in 219 Loan facilities 2m multi-currency Website Dividend policy and history (financial years) Dividends are paid annually in July/August. Income is a by-product of stock selection and there is no yield target. 5 DPS (p) Share buyback policy and history (financial years) Renewed annually, the trust has authority to purchase up to 14.99% and allot up to 5% of issued share capital. 4 Costs/proceeds ( m) Full year dividend payment Repurchases Allotments Shareholder base (as at 9 March 218) City of London Inv Group (13.3%) Lazard (11.%) Wells Capital Mgmt (1.1%) Derbyshire County Council (9.%) Standard Life Aberdeen (5.5%) Rathbones (4.4%) HBOS (4.1%) BAE Systems Pensions (3.6%) Other (39.%) Portfolio exposure by sector (as at 28 February 218, ex-cash) Information technology (29.%) Financials (27.7%) Consumer discretionary (11.8%) Industrials (9.8%) Energy (5.3%) Materials (5.2%) Real estate (3.5%) Telecom services (3.2%) Utilities (1.6%) Consumer staples (1.5%) Healthcare (1.4%) Top 1 holdings (as at 28 February 218) Portfolio weight % Company Country Sector 28 February February 217* Samsung Electronics South Korea Technology hardware & equipment JD.com (ADR) China Retailing 3.7 N/A TSMC Taiwan Semiconductors AIA Hong Kong Insurance Baidu (ADR) China Software & services HDFC Bank India Banks CNOOC China Oil & gas 2.9 N/A Tencent Hong Kong Software & services 2.9 N/A Hyundai Motor (preference shares) South Korea Automobiles MediaTek Taiwan Semiconductors 2.8 N/A Top Source: Invesco Asia Trust, Edison Investment Research, Bloomberg, Morningstar. Note: *N/A where not in end-february 217 top 1. Invesco Asia Trust 23 March 218 2

3 Market outlook: Global growth favourable for Asia The MSCI AC Asia ex-japan index has performed strongly over the past year to end-february 218, rising 19.5%, significantly outperforming the MSCI World (6.6%) and FTSE All-Share (4.4%) indices. Accelerating global growth has been favourable for Asia, and spurred strong earnings momentum for exporters and cyclical sectors, which are significant drivers for the region s markets. As a result, Asian equities valuations are no longer cheap; however, they are also not overly expensive, comparing favourably with global equities. The right-hand chart in Exhibit 2 shows Asian equities currently trading at a c 15% forward P/E multiple discount to global equities, having previously achieved premium valuations as recently as 212. Exhibit 2: Market performance and valuation Performance of indices (last five years, all in ) DS Asia ex-japan vs DS World valuation comparison Mar-13 Sep-13 Mar-14 Mar-13 Sep-13 Mar-14 Sep-14 Sep-14 Mar-15 Mar-15 Sep-15 Mar-16 Sep-16 % -5% -1% -15% -2% Sep-15 Mar-17 Sep-17 Mar-18 Fwd PE (x) Mar-16 Sep-16 Mar-17 Sep-17 Mar-18-25% MSCI AC Asia ex-japan MSCI World FTSE All-Share Asia ex-japan P/E P/E premium/(discount) to World index (RHS) Source: Thomson Datastream, Edison Investment Research. Note: Valuation data as at 21 March 218. Fund profile: Targeting long-term capital growth IAT was launched in July Its objective is to provide attractive long-term capital growth through fundamental investing in a diversified portfolio of Asian and Australasian equities. Since 1 May 215, the trust has been benchmarked against the MSCI AC Asia ex-japan index, changing from the MSCI Asia-Pacific ex-japan index, which more suitably reflects IAT s habitual significant underweight to Australasia. The trust has the freedom to invest in companies of all sizes across the region with relatively few constraints, notably a maximum exposure of 1% of total assets to any one company, unquoted investments, and investments in warrants and options. Gearing is permitted up to 25% of net assets. The portfolio typically consists of around 5-6 stocks, which represent the manager s highest conviction investment ideas. The fund manager: Ian Hargreaves The manager s view: Still plenty of attractive investment ideas Asian equities have performed strongly over the past year, and Hargreaves believes that, at current price levels, the risk-reward ratio is now fairly balanced. Although he now has more confidence in the outlook for global growth, he expects the rate of growth to peak this year. In the US, it is likely that the Institute for Supply Management s (ISM) leading indicator peaked in October 217. China s growth is also slowing, although this is not necessarily evident in reported headline numbers. The manager observes other indicators that point to slowing growth, including sales of property, cars and cement. China s central government policies to dampen consumer credit growth, which has Invesco Asia Trust 23 March 218 3

4 grown by around 3% pa over the past few years, as well as to curb financial powers of local governments, all point towards tighter credit conditions. Given Asian exporters sensitivity to the US and China s GDP growth, and the global bias towards raising interest rates, the economic backdrop has become more challenging, but not disastrous, for earnings. Earnings revisions for 217 have been stronger than expected, and consensus forecasts are looking for an ambitious 18% earnings growth in 218. Positive surprises should be harder to achieve, while valuations are above average, but not overstretched. In this environment, Hargreaves has reduced the trust s exposure to cyclical sectors, such as IT hardware, cement and real estate, but cautious optimism is underpinned by his ability to continue to find interesting investment ideas elsewhere. Asset allocation Investment process: Bottom-up, valuation discipline The manager s investment approach is fundamental, seeking to identify stocks with quality characteristics, which are intrinsically undervalued with a three- to five-year investment horizon. A well-resourced team of six experienced fund managers and analysts each travel to Asia three or four times each year, meeting around 7 company managements. Investment ideas are subject to in-depth analysis, focusing on a company s competitive position, financial health, understanding the key drivers of earnings growth, and management quality. These assessments help determine a company s fair value and identify candidates for a shortlist of stocks, which are ranked by expected total annual return over a three-year horizon. Portfolio construction is mainly driven by bottom-up considerations, including the expected return of a stock, conviction level and liquidity. Portfolio risk is managed through in-depth knowledge of investee companies, and rigorous valuation discipline to help protect against capital loss. Diversification is also an important part of risk management, and the team s top-down economic analysis provides an overlay to help guide the portfolio s sector and country weightings. Current portfolio positioning Over the past year to end-february 218, the most significant changes to the portfolio are a reduction in information technology (-5.5pp) and increased exposures to financials (+6.6pp) and energy (+3.1pp). Information technology remains the largest sector exposure at 29.%. The main reductions were to the highly cyclical hardware and semiconductor manufacturing sub-sectors, where Hargreaves believes profitability has peaked. He sold the position in Taiwanese passive component manufacturer Yageo. Tight supply for its components resulted in meteoric levels of profitability and gross margins in 217 increased from 24% to 32% year-on-year. Samsung Electronics Co (SEC) in Korea also benefited from a very tight market for its products (DRAM and NAND semiconductors) and achieved 25-year-high margins. With new semiconductor supply in the region looming, the manager trimmed the SEC position to 5.3% (down from a peak of around 8.%). It remains the largest holding in the portfolio, however, as the manager believes demand for its products will continue to grow, and the stock is still modestly valued. The manager added Australian general insurance company, QBE, to IAT s portfolio. Extremely low interest rates have depressed insurance companies profitability for many years. However, the interest cycle has started to reverse, which should be positive for margins. A significant number of catastrophes in 217 (including hurricanes Harvey, Irma and Maria, and wildfires in California) resulted in hefty write-downs and profit downgrades. A restructuring of the business is underway, while a new CEO is in place. Hargreaves believes QBE has good recovery potential driven by cyclical factors and medium-term benefits from restructuring. The manager also added to the position in Korean Reinsurance, which should share similar cyclical recovery potential. The Invesco Asia Trust 23 March 218 4

5 company is relatively small in market capitalisation terms, and less well-researched, contributing to its modest valuation of.6x price-to-book ratio. Hargreaves believes the company, which commands a c 6% share of the Korean reinsurance market, can generate a return on equity of around 1% in normalised conditions, suggesting the shares are meaningfully undervalued. Exhibit 3: Portfolio geographic exposure vs benchmark (% unless stated) Portfolio end- February 218 Portfolio end- February 217 Change (pp) Benchmark weight Active weight vs index (pp) Trust weight/ index weight (x) Hong Kong & China (3.9).9 South Korea (1.7) India (1.8) Taiwan (2.) 13.3 (.7).9 Japan N/A Australia N/A Singapore (2.).5 Thailand (1.4).5 Philippines (.1) Indonesia (2.) 2.5 (1.3).5 Malaysia (2.).3 Pakistan....1 (.1) Source: Invesco Asia Trust, Edison Investment Research. Note: Rebased for cash/gearing. Exhibit 4: Portfolio sector exposure vs benchmark (% unless stated) Portfolio end- February 218 Portfolio end- February 217 Change (pp) Benchmark weight Active weight vs index (pp) Trust weight/ index weight (x) Information technology (5.5) 31.2 (2.2).9 Financials Consumer discretionary (1.4) Industrials Energy Materials (.7) Real estate (1.7) 6.1 (2.6).6 Telecom services (1.8) 4.6 (1.4).7 Utilities (1.2) 3. (1.4).5 Consumer staples (2.9).3 Healthcare (.6) Source: Invesco Asia Trust, Edison Investment Research. Note: Rebased for cash/gearing. Hargreaves also added to ICICI Bank in India as he gained conviction on India s credit cycle recovery. A credit boom in the years preceding the global financial crisis left many banks, including ICICI Bank, with a high proportion of non-performing loans. However, little progress was made to recognise these problems until recently. The Modi government has recapitalised the state banking sector and introduced a new bankruptcy code, which is leading to accelerated recognition of impaired assets. ICICI Bank has been implementing these measures, paving the way for balance sheet and profit recoveries over the next months. The bank is well capitalised, and its core business is highly profitable. Post recovery, Hargreaves expects the bank to be able to generate a normalised mid- to high-teens return on equity, leading to a potential re-rating of the stock. In the energy sector, the manager increased the holding in China-listed oil and gas company, CNOOC. Following a meeting with the company s CEO in the second half of 217, Hargreaves gained conviction on the quality of the company s assets and management capability. The market perceives the company as low growth and inefficiently managed, typical of state-owned enterprises in China. The team s in-depth research concluded otherwise, and is confident CNOOC can continue to generate good growth and profitability, benefiting from one of the lowest lifting costs among its global peers. The manager also bought a new position in Japan-listed Inpex, which has a large LNG project based in Australia due to come on-stream imminently. This project could transform the profitability of the company, with the prospect of generating a free cash flow yield of c 1% over the next two years. The manager believes the LNG market could be undersupplied by Invesco Asia Trust 23 March 218 5

6 the end of the decade as China is switching from coal to gas usage more quickly than originally envisaged. Performance: Good investment track record As shown in Exhibits 5 and 6, IAT has a strong medium- and long-term track record; its price and NAV total returns have outperformed the benchmark over three, five and 1 years. Over one year, IAT s NAV has modestly lagged the benchmark, although its share price performance is in line. IAT s NAV total return relative performance is even stronger when measured against the FTSE All- Share index, outperforming over all periods shown. Exhibit 5: Investment trust performance to 28 February 218 Price, NAV and benchmark total return performance, one-year rebased Price, NAV and benchmark total return performance Mar-17 Apr-17 Feb-15 May-17 Jun-15 Jun-17 Oct-15 Jul-17 Feb-16 Aug-17 Jun-16 Sep-17 Oct-16 Jun-17 Oct-17 Oct-17 Source: Thomson Datastream, Edison Investment Research. Note: Three-, five- and 1-year performance figures annualised. Benchmark is MSCI AC Asia Pacific ex-japan until 3 April 215 and MSCI AC Asia ex-japan thereafter. Exhibit 6: Share price and NAV total return performance, relative to indices Nov-17 Dec-17 Jan-18 IAT Equity IAT NAV Benchmark One month Three months Six months One year Three years Five years 1 years Price relative to benchmark (2.1) (3.8) (1.2) NAV relative to benchmark (.5) (2.7) (1.1) (2.) Price relative to FTSE All Share (.7) (.2) NAV relative to FTSE All Share Source: Thomson Datastream, Edison Investment Research. Note: Data to end-february 218. Geometric calculation. Performance -1 Exhibit 7: NAV total return performance relative to benchmark over three years m 3 m 6 m 1 y 3 y 5 y 1 y IAT Equity IAT NAV Benchmark Source: Thomson Datastream, Edison Investment Research Discount: New approach to discount management IAT currently trades at an 11.% discount to ex-income NAV, which is in line with its three-year average, with the discount ranging between 6.8% and 14.2% over this period. Previously, the board Invesco Asia Trust 23 March 218 6

7 proposed a tender offer if the trust s shares traded over any financial year at an average discount of more than 1.% to ex-income NAV. In 217, the board reconsidered the appropriateness of tender provisions with a specific discount trigger, and concluded the practice to be against shareholders long-term interests, potentially shrinking the size of the trust, leading to higher ongoing charges and lower liquidity. Tender offers have therefore been discontinued. Managing the trust s share price discount continues to be an important focus for the board, aiming for a share price discount of less than 1% of ex-income NAV in normal market conditions. The board has shareholder approval, renewed annually, to buy back up to 14.99% of its shares, and will use this facility at its discretion, when repurchases can enhance the NAV, taking into consideration factors such as market conditions and the discounts of comparable peers. Exhibit 8: Share price premium/discount to NAV (excluding income) over three years Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Jun-17 Oct-17 Source: Thomson Datastream, Edison Investment Research Capital structure and fees IAT is a conventional investment trust with one class of share. Following a tender offer for 15% of ordinary shares at a 2% discount to NAV, on 1 August 217, there are currently 7.9m ordinary shares in issue. The trust is subject to a continuation vote every three years; the next is at the August 219 AGM. Gearing is permitted, of up to 25% of net assets and IAT has an unsecured 364- day, multi-currency revolving credit facility for 2m with Bank of New York Mellon. In practice, the trust uses leverage conservatively; as at end-february 218, IAT had no gearing and a net cash position of.5%. Invesco Fund Managers is paid an annual management fee of.75% of net assets on a quarterly basis. The fee is paid out of revenue and capital income, split 25% and 75% respectively. There is no performance fee. In FY17, IAT s ongoing charge at end-february 218 was.97%. Dividend policy and record IAT s primary objective is to generate long-term capital growth, rather than dividend income. Since FY1, dividends have either increased or been maintained, and in FY17 the annual payment of 4.3p per share represented an 18% increase compared to FY16. This reflects robust revenue per share of 4.74p from strong earnings generated by investee companies, and the weakness of sterling following the EU referendum result. The current dividend yield of 1.5% compares relatively favourably to peers, ranking fourth among a group of 12 funds (Exhibit 9). Invesco Asia Trust 23 March 218 7

8 Peer group comparison IAT is a member of the AIC Asia Pacific ex-japan sector. Exhibit 9 shows an adjusted sector peer group, with the removal of three trusts with an income mandate, and a small trust with a shorter performance track record. IAT s NAV total return compares favourably versus the peers over the longer term, ranking fifth, second and fourth over three, five and 1 years respectively. Over each of these periods, the NAV total return was significantly above the peer group average. IAT s dividend yield ranks fourth, although the discount to (ex-par) NAV is wider than the average, ranking seventh. It is one of the smaller funds in the group. Exhibit 9: Selected peer group as at 21 March 218* % unless stated Market cap m NAV TR 1 year NAV TR 3 year NAV TR 5 year NAV TR 1 year Discount (ex-par) Ongoing charge Perf. fee Net gearing Dividend yield Invesco Asia Trust (11.) 1. No Aberdeen Asian Smaller (11.9) 1.2 No Aberdeen New Dawn (13.3).9 No Edinburgh Dragon (12.2) 1. No 1.9 Fidelity Asian Values (1.6) 1.3 No JPMorgan Asian (11.9).7 No Martin Currie Asia Unconstrained (1.5) 1.1 No Pacific Assets (2.7) 1.3 No 1 1. Pacific Horizon (2.2) 1.1 No 17. Schroder Asia Pacific (1.7) 1. No Schroder Asian TR Inv. Company Yes Scottish Oriental Smaller Cos 3.8 (.6) (13.2) 1.2 Yes Weighted average (8.9) Trust rank in sector (12) Source: Morningstar, Edison Investment Research. Note: *Performance data to 2 March 218. TR = total return. Net gearing is total assets less cash and equivalents as a percentage of net assets (1 = ungeared). The board IAT s board has five independent, non-executive directors. Chairman, Carol Ferguson, joined in March 29 and assumed her current role in August 213. Tom Maier was appointed in March 29, Owen Jonathan in March 213 and Fleur Meijs in December 216. Following the retirement of James Robinson in August 217, after over 1 years service, the board appointed Neil Rogan, with effect from 1 September 217. 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Frankfurt +49 () Invesco Schumannstrasse Asia 34b Trust 23 March High Holborn 295 Madison Avenue, 18th Floor Level 12, Office Frankfurt Germany London +44 () London, WC1V 7EE United Kingdom New York , New York US Sydney +61 () Pitt Street, Sydney NSW 2, Australia